Deep Debt, Wall Street Wealth

This NY Times article outlines the factors that formed the $72 million debt Puerto Rico has amassed. There were many incentives for lenders to provide money to the island, including avoiding taxes and laws that gave bond buyers a guarantee. However, the amount of debt has become insurmountable, and it is expected that every resident of the island will owe creditors $40,000. Many of the lenders were middle-class who wanted to cash in on the tax-exempt municipal bonds. Additionally, Puerto Rico’s constitution contains a clause which demands bonds be paid before any other government expense. As the borrowing expanded, Puerto Rico was running out of revenue streams that would be able to pay the creditors back, with different sectors borrowing money from one another to pay back other sectors

A piece of legal scholarship, this journal article discusses the source of Puerto Rico’s debt—the unscrupulous practice of hedge funds that bought junk-rated municipal bonds at extremely low prices and then charged excessively high interest rates. Consequently, the author argues, the debt is not only odious in effect and impact, but also in origin: the debt was not accumulated for the purpose of benefitting the population and should therefore not be repaid. The context of colonialism is crucial to understanding debt and its odious nature. The author suggests that Puerto Rico could argue the odiousness of its debt as a defense to repayment.

This in-depth magazine article analyzes the “vulture” hedge funds that are responsible for a large portion of Puerto Rico’s debt. These hedge funds prey on troubled governments, such as Puerto Rico and Greece, buy cheap debt and then coerce their debtors to pay, at the expense of millions of citizens. The article discusses Puerto Rico’s challenges, such as the fact that it has no power to renegotiate its debt, the “vulture” hedge funds lack of transparency (hedge funds don’t have to report their bond purchases), and their political ties that provide them with a voice in Washington. Moreover, the author describes different solutions that are being considered such as bankruptcy and nullifying the debt.

This news article discusses the process through which Puerto Rico got immersed in debt with hedge funds and how the bond holders dominate discussions of possible solutions to the Island’s debt crisis. Paying the hedge funds and financiers means imposing serious austerity measures in Puerto Rico and, essentially, letting investors, some of the wealthiest people in America, rewrite the social contract for the US territory. The article shows how bankruptcy was discussed in terms of what advantages bondholders could establish and how the bondholders ultimately favored Puerto Rico being submitted to federal financial oversight.

This article published in an academic journal dedicated to economic and labor issues, discusses the effects that the debt crisis has had on the working and middle classes, including how past fiscal emergency laws have produced the loss of one in four government jobs and eroded the compensation and benefit packages for those remaining in public employment. Making the government reduce its expenses even more is serious, considering how much Puerto Rican society depends on the government for employment, investment, purchases, etc. The article discusses efforts on the Island, particularly from local unions, to challenge further austerity measures, which would be imposed by the Washington-recommended Fiscal Control Board.

Responding to the discourse where the Puerto Rican government is blamed for mismanaging money and the bondholders are people maintaining fiscal responsibility, this article argues that, if the Island’s debt is viewed as the global problem that it is, it will become evident that the bondholder’s and lender’s suggestions do not solve the economic issue justly and efficiently. The author draws upon economists Joseph E. Stiglitz and Martin Guzman work on debt restructuring in order to analyze the debt crisis in Puerto Rico. With this theoretical analysis, the author finds that more responsibility should be given to the lenders and the government’s financial advisors. In particular, the author argues that the unjust and counterproductive agenda of the lenders must be resisted. Austerity measures will cause the debt to grow and worsen the economic crisis.

The authors of this article clarify the different types of debt and creditors behind Puerto Rico’s debt crisis. The investment firms are divided into what the authors term “clans.” These groupings depend upon the type of debt the firms are trying to recuperate and those that support restructuring the debt and those who do not. The article describes the different “clans” and their particular interests and ties to Puerto Rico’s ballooning debt.

In this article, the author argues that the PROMESA law, approved by Congress, which compelled Puerto Rico to essentially be governed by an unelected Fiscal Control Board, is evidence of the territorial colonial federal structure of the Island. The article focuses on the campaign in favor of auditing the debt, which seeks to challenge the Fiscal Control Board’s austerity measures. The author takes a critical stance, analyzing the positive and negative consequences of auditing the debt, emphasizing the need to not merely blame corrupt Puerto Ricans, but to take into consideration colonialism’s role in the debt.